>>25348831Alternate theory, Pokemon are rapidly mutating/adapting/absorbing animals (like a cute version of the Thing/Borg) to create new kinds and displacing normal animals. By the latest point in the Pokemon timeline the regular animals are almost entirely extinct. Some evidence for this would be how vastly different Pokemon are within the same species (egg group) meaning they have highly malleable DNA, the appearance of new Pokemon in general, and of course regular animals being referenced in the Pokedex. Its also possible that Pokemon as a whole are unnatural, seeing as a number of them come from space, other dimensions, or are even artificially made.
Animals were rare but still in gen 1 because there really were only around 200 Pokemon at the time, they hadn't exploded into the 700+ we have now. There were only a handful of ancient Pokemon due to ancient animals like dinosaurs being strong enough to compete with them.